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Trading on the NYSEMIKE SEGAR

When it comes to dividend investing, payout growth is just as important as current yield. Among the highest-yielding U.S. stocks are blue-chip Dow components. But, not all Dow stocks are on equal footing in terms of shareholder treatment. In fact, some of the highest-yielding Dow stocks, such as Pfizer , have cut their dividends in the past. Below is a snapshot of those with the best three-year dividend growth.

10. Exxon , 3-Year Dividend Growth: 28 per cent

9. Caterpillar , 3-Year Dividend Growth: 29 per cent

8. Coca-Cola , 3-Year Dividend Growth: 30 per cent

7. J&J , 3-Year Dividend Growth: 30 per cent

6. Microsoft , 3-Year Dividend Growth: 34 per cent

5. P&G , 3-Year Dividend Growth: 39 per cent

4. Wal-Mart , 3-Year Dividend Growth: 43 per cent

3. Un. Tech. , 3-Year Dividend Growth: 50 per cent

2. Intel , 3-Year Dividend Growth: 71 per cent

1. IBM , 3-Year Dividend Growth: 71 per cent

Now, here is a look at the Dow companies expected to raise their dividend the most in 2011.

10. American Express is a credit-card company. Third-quarter sales increased 9.7 per cent, but net income and earnings per share more than doubled. American Express has grown its dividend 25 per cent in the past year. It has boosted the payout 13 per cent, on average, over three- and five-year spans. The stock receives buy recommendations from two-thirds of analysts in coverage. Piper Jaffray offers the highest price target, at $64 (U.S.), implying a 12-month gain of 43 per cent. Credit Suisse rates the stock "underperform" with a low $40 target.

9. Wal-Mart is the world's largest company, based on sales. Third-quarter revenue ascended 2.6 per cent and net income increased 9.3 per cent. Earnings per share advanced 16 per cent to 95 cents, boosted by a smaller float. Wal-Mart has expanded its dividend 11 per cent over a one-year span and 11 per cent, on average, over three years. It has boosted the payout by 15 per cent, on average, over a five-year span. Analysts remain optimistic about the stock's 2011 upside, with 24, or 71 per cent, advising clients to purchase shares. HSBC offers a target of $68, suggesting a 26 per cent one-year gain.

8. Johnson & Johnson sells consumer products, pharmaceuticals and medical devices. Its third-quarter profit inched up 2.2 per cent to $3.4-billion, or $1.23 a share, as revenue declined marginally. J&J has boosted its quarterly distribution 9.3 per cent in the past year, and 9.2 per cent and nearly 11 per cent, on average, respectively, over three- and five-year periods. Analysts are lukewarm on the stock, which receives 13 "buy" ratings and 12 "hold" calls. No researchers advise selling. Citigroup predicts J&J's stock will advance 11 per cent to $70. Goldman Sachs expects the shares to decrease to $59.

7. Coca-Cola makes syrup and beverages. Coke's third-quarter net income stretched 8.4 per cent to $2.1-billion, or 88 cents a share, as sales increased 4.7 per cent. Coke has amplified its dividend 7.3 per cent in the past 12 months. It has boosted the payout 9 per cent and 9.5 per cent, on average, respectively, over three- and five-year spans. Coke is currently the highest rated Dow stock, based on analyst rankings. Of researchers following the company, 17, or 81 per cent, advise purchasing its shares, and four recommend holding them. Barclays expects the stock to climb 18 per cent to $74.

6. Microsoft is the world's largest software company, selling the Windows operating system and Office product suite. Fiscal first-quarter net income surged 51 per cent to $5.4-billion, or 62 cents a share, as revenue extended 25 per cent. Microsoft has increased its distribution 5.8 per cent in the past year. It has grown the payout 10 per cent and 11 per cent, respectively, on average, over three- and five-year horizons. Three quarters of analysts in coverage recommend that clients buy Microsoft, making it the fourth highest-rated Dow stock. Stifel Financial projects a $40 price target.

5. Procter & Gamble is a consumer products company, selling beauty, grooming and health care products. Fiscal first-quarter net income dropped 6.8 per cent, but earnings per share rose 5.2 per cent to $1.02, boosted by a lower share count. Revenue inched up 1.6 per cent to $20-billion. P&G's dividend has risen 9.6 per cent over a one-year span. It has grown 12 per cent, on average, in the past three years and the past five years. The stock receives "buy" ratings from 68 per cent of analysts in coverage. A median target of $71.92 suggests an impending 12-month advance of 12 per cent.

4. Pfizer is the world's largest pharmaceutical company. Third-quarter net income tumbled 70 per cent to $866-million, or 11 cents a share, as revenue rebounded 39 per cent. Despite being among the cheapest Dow stocks, with a forward P/E of just 7.9 (a 35 per cent peer discount), many investors are avoiding Pfizer due to patent expiry in 2011. Currently, 19, or 70 per cent of researchers, rank the stock buy, six rate it hold and two rank it sell. JPMorgan is most optimistic about upside, offering a $24 price target. Conversely, Citigroup predicts that the shares will drop nearly 7 per cent to $17.

3. General Electric is an industrial conglomerate. Its third-quarter earnings per share advanced 32 per cent to 29 cents. Revenue declined 4.5 per cent. The payout has dropped 26 per cent, on average, over a three-year span and 13 per cent, on average, over a five-year horizon. Still, analysts predict that distributions will rise in the near term as the economic recovery accelerates. Of those covering GE, 10, or 53 per cent, advocate purchasing its shares and nine recommend holding them. Credit Suisse has a target of $22.

2. JPMorgan Chase is a diversified financial services company. Like many other big-cap financials, JPMorgan cut its dividend during the financial crisis as it struggled to boost capital ratios and shore up its balance sheet. Currently, its stock pays a quarterly dividend of just five cents, converting to a paltry 0.5 per cent yield. Researchers expect the payout to more than triple in the quarters ahead as earnings normalize. JPMorgan is the second highest-rated Dow stock, receiving positive reviews from 82 per cent of analysts in coverage. FBR dissents, with a modest $45 target.

1. Bank of America , like JPMorgan, is a bank with retail, corporate and investment operations. Its dividend has plummeted from a high of 64 cents in 2008 to just 1 cent in the most-recent quarter. Analysts expect the distribution to more than triple in the near term. The distribution may have even further upside, given historical yields. Bank of America has been a recent top performer, having risen 21 per cent in the past month as foreclosure scrutiny subsided. But an unfavorable court ruling in Massachusetts on Thursday sent the shares down 2.3 per cent intraday.

Editor's Note: An earlier version of this story from incorrectly stated that GE has cut its dividend 25 per cent in the past 12 months. This has been corrected.

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